Airport puts lid on rivals of Northwest
New terminal won't allow added service
February 7, 2004
FREE PRESS BUSINESS WRITER
The head of the Wayne County Airport Authority says he wants to renegotiate a little-known 2001 agreement with Northwest Airlines that keeps competing airlines from adding gates and international service at the new terminal planned for Metro Airport.
Authority Chairman James Nicholson wants the $428-million North Terminal to attract new airlines and encourage existing carriers to add service, hoping the competition would bring down fares charged by Northwest, which carries three of every four passengers at the airport.
The North Terminal, opening in 2007 or 2008, would be a rebuilding of the Davey Terminal, where Northwest used to fly from. The Smith Terminal, the airport's oldest and the one now used by Northwest competitors, would be demolished.
But the project has considerable restrictions because of the agreement signed by Wayne County and Northwest on Sept. 27, 2001.
"Times change," Nicholson said Monday. "There are real constraints on what we can do."
Northwest agreed to support the North Terminal and a second phase to the new McNamara Terminal in exchange for several conditions that could influence the competitive mix of airlines at Metro for decades to come.
Two of the most crucial terms in the 2001 agreement:
The new terminal is restricted to a maximum of 29 gates. The gates are only for narrow-body jets such as Airbus A320s and Boeing DC-9s.
Gates for wide-body jets such as Airbus A330s or Boeing 747s, needed for longer-distance flights, could be built, but each would then take the place of up to two of the allotted 29 gates.
Airlines competing with Northwest currently operate 30 gates at the Smith Terminal.
The North Terminal cannot contain a customs and immigration facility, which means a competing airline would not be able to offer incoming international service there. Consumer advocates and airline experts say the restrictions will limit customer choice, prevent new airlines from entering the Detroit market, and give Northwest an unusual amount of power over its competitors.
Airport officials said the 2001 agreement doesn't contain an expiration date. Northwest's lease at Metro runs through 2032.
McNamara signed the deal
Nicholson said he wants his airport authority to persuade Northwest to give the airport more flexibility and have an immigration and customs department at the new terminal. He said the 2001 agreement was signed when the authority did not exist.
The agreement was signed by then-Wayne County Executive Ed McNamara and James Greenwald, Northwest's vice president of facilities and airport affairs.
"If I was to do this type of agreement I would not have put in those restrictions," said Michael Glusac, a board member and secretary of the airport authority.
Andrea Fischer Newman, senior vice-president of government affairs for Northwest, said the agreement followed one negotiated in the mid-1990s between all the airlines and the county. She said if airlines or the airport wanted to expand, "Northwest is always open to discussions."
The 2001 agreement and its restrictions received little public notice.
Such restrictions are rare, experts said.
"I have never heard anything like this," said Kevin Mitchell, chairman of Business Travel Coalition, a lobbying group for corporate buyers of airline services. "It sounds very heavy-handed."
Most airports don't have such restrictions because it discourages competition, said Morten Beyer, chairman of Morten Beyer & Agnew, an airline industry consultant.
"I have never seen one that is so blatant as that one," said George Doughty, executive director of Lehigh Valley International Airport. Doughty was the director of aviation for Denver between 1984 and 1992 when he oversaw construction of Denver International Airport.
Northwest also has veto power over any capital improvement programs at Metro.
Spirit, American Airlines, America West Airlines, Southwest Airlines, United Airlines and US Airways would use the North Terminal. Northwest, its affiliates such as Continental and KLM, and Lufthansa use the McNamara Terminal.
Airport leaders want the new terminal to be as good if not better than McNamara, which cost $1.2 billion.
But Nicholson said the restrictions could prevent that.
Competitors have avoided confrontation on the issue.
"While there are limitations that will be placed upon the new terminal . . . we are confident that we will develop a state-of-the-art facility that is both customer friendly and operationally sound," said Jacques Beaumier, director of properties and facilities for Spirit Airlines Inc. Beaumier is also chairman of the North Terminal airline committee, which is made up of the airlines using the Smith terminal.
The 29-gate restriction prevents competing airlines from expanding service substantially -- unless Northwest approves.
"I don't know if 29 is too little or too much or just right," authority member Glusac said. But the airport has to look four to five decades ahead and needs more flexibility, he said.
Airport CEO Lester Robinson said the 29-gate restriction arose from a survey for requirements in 2001. "We are not planning for four or five decades from now in the facility we are putting in," but the next 10 years, he said.
The airport, meanwhile, is evaluating the economic viability of the Berry Terminal, which is used for a few international flights. If the Berry Terminal is not viable, the airport may want to demolish it and shift international and charter operations to the new complex, Robinson said. For that it would need Northwest permission.
Robinson also said the airport may need more gates. He said Northwest has been cooperative in the past and he doesn't see a problem in getting the airline's approval.